Fri. Oct 22nd, 2021
    How Do Sports Agencies Make Money

    Similar to the arts, sporting talent requires management and agents. Sports agencies represent athletes such as boxers, footballers, and golfers. A sports agency’s job primarily consists of negotiating contracts, marketing talent, and promoting events[1]. Most agencies consist of professional personnel who are skilled at these jobs, and they require payment for their services.

    Most agents aren’t paid directly and work for commission[2]. Commission means that they earn a small percentage on each contract. There are various sports contracts on which an agency can make money. Still, they primarily relate to managing an individual or work performed on behalf of a company such as a football team.

    The most common income streams of sports agencies are:

    • Direct or Indirect Commission
    • Sponsorship and Endorsement
    • Wider Opportunities

    The talent represented, such as a professional boxer, owes a fee to the agent for services rendered. An agency’s pay comes from a percentage of any extra deals that form part of an athlete’s income. It is now common for athletes to become celebrities. Any other appearances by a celebrity sports-person also make money for an agent.

    Direct or Indirect Commission

    Agencies typically handle the managerial aspects of a professional sports star, and therefore agents work pretty hard. However, while the work is hard, it pays well. Agents are paid on behalf of the talent by either the team they work for or the talent themselves. The typical commission for a sports agent lies between 4% and 10% of an athlete’s general contract[2], but this can vary by sport and location. In the USA, for example, some states, such as Florida, have different limits.

    The pay varies because commission rules govern each sport and the leagues within them. For example, the American NBA and NFL have a capped commission of 3%[3] of a player’s salary. In contrast, the NHL and MLB have no such limits. FIFA also recently announced a 3% limit on the commission gained from the wages of soccer stars[4], putting an end to the complexities of English football transfer negotiations.

    However, an agent can earn more commission from other sources such as endorsements.

    Sponsorship and Endorsement

    In addition to a commission on athlete salaries, sports agents can increase their earning potential by actively seeking lucrative deals for their clients. These usually include sponsorships and endorsements. Contracts of this nature work exceptionally well for both the agent and the client as large corporations pay vast sums to famous athletes in return for promoting products. For example, living football legend, Christiano Ronaldo, has a lifetime deal with Nike above $1 billion[5].

    Additionally, sponsorship can capitalize on the free advertising of live events. For example, the team and sports fans themselves wear their jerseys at live games, and sponsors are prominently displayed on those jerseys – capitalizing on exposure each time. Global corporations such as McDonald’s and Coca-Cola regularly sponsor sporting events such as the Olympics. An agent involved in making such deals can claim 10 to 20% of the payment[3] made to the talent.

    A good sports agency will always look for more earning potential for their clients, such as TV appearances and social media engagement.

    Wider Opportunities

    A sports star’s earnings don’t stop at their team-based and event contracts or sponsorship and endorsement. Increasingly, since Michael Jordan graced the silver screen in Space Jam, athletes have become just as well-known for their artistic talents. In addition, the celebrity status of most athletes puts them in a unique position to indirectly sell or promote an artistic production such as a movie, music video, or TV show by briefly appearing.

    An agency that represents such stars can negotiate commission on such cameos. In addition, a reputable agency will strive to find multiple opportunities for their clients to branch out into all manner of exposure. Exposure aims to make them global superstars and influencers, with social media being a primary platform of delivery. On Instagram alone, on a per-post level, the earning potential is enormous. David Beckham earns $300,000 just for posting each image[6].   

    Conclusion

    Sports agencies make money by charging commission to any star they hold as a client. Therefore, an agent is paid a commission by working for client sports stars. Work undertaken by an agency includes club negotiation, financial management and endorsements.

    Although commissions are small in percentage, the income from them is potentially huge. The large amount is due to the significant salary negotiations of sports stars. Commissions percentages vary widely from sport to sport and location to location, but a typical salary commission is 3%.

    However, it isn’t uncommon for famous athletes to be offered sponsorship endorsements that can reach staggering amounts if the agency does its job well. In these cases, the agency can claim up to 20% of a negotiated deal.

    Agencies can earn further commission through opportunities outside of the sports arena. For example, prominent athletes may appear in big-budget movies, music videos, or television shows for which the agent can negotiate a commission. In addition, 21st-century opportunity also includes social media marketing as a lucrative commission source.

    References

    1. Job Hero. Sports Agent Job Description. https://www.jobhero.com/job-description/examples/sports/agent
    2. Chron. The Average Sports Agent’s Commission. https://work.chron.com/average-sports-agents-commission-21083.html
    3. Wikipedia. Sports Agent. https://en.wikipedia.org/wiki/Sports_agent#:~:text=Sports%20agents%20generally%20receive%20between,of%20their%20client’s%20playing%20contracts.
    4. BBC Sport. Fifa to introduce new agent regulations and limit commission. https://www.bbc.co.uk/sport/football/54834219
    5. Man of Many. 6 Largest Athlete Endorsement Deals in the Modern Era. https://manofmany.com/entertainment/sport/athlete-endorsement-deals
    6. Bar Down. 11 athletes who earn unbelievable amounts of money just by posting on Instagram. https://www.bardown.com/11-athletes-who-earn-unbelievable-amounts-of-money-just-by-posting-on-instagram-1.1148958

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